Costa Rica Financing Options

Residents vs. Non-residents

If you are planning on buying a vacation home that you will only use part of the year, then you don't need to become a legal resident of Costa Rica. Foreigners may own property here and you enjoy the same rights and obligations as Costa Ricans. But if you would like a loan to finance the purchase of your vacation home, then you will probably be looking at getting owner financing or financing from the developer. This can work out well, particularly if the development is a large community with a rental management program. You will be able to offset a portion of the mortgage payment with rental income from the property

Financing for non-residents

Until recently financing for non-residents was hard to come by, usually buyers ended up making arrangements with the owner, or using equity to get a loan on their property back home, which they then applied to the purchase of property in Costa Rica.

However, this is now changing. Many banks are now offering loans based on your U.S. credit, and there are some private financial entities servicing this market as well.

Owner financing is still an easy option, if possible. You can make a sizable down payment (50% to 70%) and get 2 or 3 years on the remainder. In the meantime you begin the process of getting residency and then pay off the owner's loan with the mortgage you get as a resident.

Another common way is to purchase the home in Costa Rica with cash. The most common reason people can do this is that they have sold property back home and have the cash available to invest in a new home in Costa Rica.

Some people get a second or first mortage on property in the US that they then use to buy property here. You can also use your IRA to buy property anywhere, including Costa Rica. Article on buying foreign real estate with your IRA.

A good option is to try Scotiabank or Stewart Title. Stewart Title is a US-owned title company that advertises mortgage broker style services, but their web site provides absolutely no information. You might try calling them in the US at 800-729-1906 or in Costa Rica at 258-5600.

Scotiabank at this time is the only bank that loans money to foreigners who aren't legal residents, the application approval is based on your credit history in the U.S. and U.S income. They will loan 70% of the appraised value on the home.

Financing for Residents

If you are a legal resident, you may get a home loan from a local bank, either a private bank or one of the state banks. Visit our page Applying for a Home Loan in Costa Rica (click here) to find out more about the process and requirements for this loan.

Currently, mortgage rates in Costa Rica are fairly competitive with U.S. rates, but most buyers find the closing costs significantly higher here. This is somewhat of a misperception, as there there are some "hidden" closing costs that banks here don't add into the loan amount. An example of this is title insurance, which is mandatory in the U.S. and not required by banks here.

Appraisals in Costa Rica – Loan amounts

Each bank has their own appraisers that they work with. Some banks won't send the appraiser until the loan is pre-approved, others need the appraisal before they consider the loan. Because property values in Costa Rica are not as standardized, one thing that can happen is the appraised value is lower than the market value of the property. Most homes that expatriates buy are custom built. So getting a comparative value is difficult. Also sometimes the appraiser won't factor in features that make a home worth more on the market. Things like a panoramic view, or state-of-the-art gourmet kitchen increase a home's value significantly in the market, but sometimes not in the appraisal. It may happen that you get a loan approved for 70% of the appraised value, but it turns out to be only 55% - 60% of the market value.

Another factor to consider if you are purchasing a farm is that the bank will may only loan you money based on the value of the portion that is the residence. In other words, they consider farming a business, so that would make a loan on the farm a commercial loan rather than a mortgage. That means that the rate could be higher, the term shorter and the percentage less.